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I'm Angela Davis, a PNW native, mom of lots of kids, and I love saving money. I'm here to help you live well on a budget by making every penny count. You'll find deals at your local stores, ways to save online, recipes, and frugal living tips and inspiration.

How to establish good money habits

Shared on February 11, 2016This post may contain affiliate links which means I make a small commission if you make a purchase at no additional cost to you. See the disclosure policy for more information.

More times than not, it’s our belief that we are at the mercy of others when it comes to our money: our spouse or partner, our job, our children, the government, our debt, our hectic schedules. Regardless of the excuse we give, 99% of the time, our own behavior is the reason we have money problems.

And I totally get it — telling your money how to act is really, really hard because it means we need to become the person in charge. And this means the responsibility lands squarely on our shoulders. We need to learn how to tell our money exactly how it’s going to be spent. We need to own up to our past and how our spending behaviors have brought us to the place we are.

Here’s what my husband and I discovered when we started taking control of our money and living on a budget back in 2006:

Despite our frugal tenancies, we were still spending more money than we brought in every month.

We were spending money to make ourselves feel good without consideration to our family’s overall financial health. I took the baby shopping when I was bored. We went on vacation without checking to see if we had money to do so. We had a crappy mattress, so we bought a Tempur-Pedic on store credit.

We had bought the lie that paying for everything with a credit card with benefits and paying it off every month was the same as using cash. There were many months that we had to use our savings to cover our credit card bill because we didn’t have enough in our checking account, but by golly, we flew across the country for free twice (total).

No amount of cutting coupons, searching for deals, and accepting hand-me-downs could compensate for not living on a realistic spending plan that properly reflected our income.

We had no plan for our future apart from a yearly contribution to a Roth IRA. We were just earning money to pay for when we needed and wanted today without working on what and where we wanted to be in five, ten, and twenty years down the road.

We had no vision for the type of family we wanted to become. We knew we wanted to give significantly to causes important to us as we got older, but were behaving like that would magically happen one day without any action or sacrifice today.

I strongly believe that you will only find success in this process if you face your financial behavior head-on. What spending habits, skewed financial beliefs, and poor planning have contributed to your household’s current mess?

Here are the common erroneous financial practices that we have noticed in our lives and the lives of those who we have counseled:

1. Using credit cards instead of cash.

2. Spending next month’s paycheck today.

3. Living without an emergency fund.

4. Not planning for future expenses by saving for them every month.

5. Depending on next year’s tax return to cover current expenses or debt.

6. Using debt as a tool in any form.

7. Not allocating each spouse/partner “personal money” to spend how they wish.

9. Believing that you “deserve” something because you work hard either at your job or at home.

10. Believing it’s impossible to get ahead financially so you may as well just enjoy the little you have now.

Mark my words, living based on any of these beliefs will not bring you financial peace nor will they help you accomplish any financial goals. The only way things will change in your home is if you decide to live differently.

Once you’ve faced the financial beliefs that led you to your current financial state, the next step is to make some commitments. What changes are you willing to make to prioritize your family’s financial peace? Here are some alternative disciplines that will counter the practices outlined above:

1. Use cash whenever possible, even when it’s inconvenient.

2. Pay for your current expenses today, which means not using any sort of credit to pay for food, fuel, car/home repairs, unexpected expenses, etc.

3. Set aside money for emergencies. If you have debt aside from your mortgage, $1000 is a good place to start (this is Dave Ramsey’s suggestion).

4. Save for upcoming expenses. Write down the things you’ll have to pay for in the upcoming 12 months and start saving for them every month so you have the cash when the bill comes due.

5. Eliminate or decrease expenses so you’re not dependent on your tax return or some other anticipated windfall. Reduce your cable bill, buy secondhand clothing, use coupons along with store sales to save on groceries and household items, research cheaper insurance policies, etc. Use freed up money every month to first to pay off debt and then save for future purchases.

6. Take debt off the table as an option in your life. Pay cash for it or don’t buy it. Once you refuse to go into further debt, it’s amazing how creative you can get and how much easier it is to say “no” to yourself.

7. Set aside cash every month for each adult in the house to make independent spending decisions, even if it’s just $10. This alleviates most arguments about money because no one feels like they need to get permission to buy a shirt or a video game or a latte.

8. Say “no” to “bigger and better” for the time being. Practice the discipline of contentment and elect to be happy with what you have so you can target money to achieve your family’s financial goals.

9. Live as though you don’t deserve it if you can’t afford it (and I’m not talking about affording the payments — can you afford the entire payment). This applies to your children as well. You only deserve what you can pay for in cash without jeopardizing your financial health.

10. Decide to sacrifice the minimally awesome today for the dream of supremely awesome in the future. Commit to becoming the person who believes that life can be better with hard work and sacrifice.

Our family has consciously committed to living by the disciplines outlined above. It was difficult at first, as any new practice is, but after almost ten years it has become very much a natural part of our daily lives. Sometimes we are tempted by a purchase or business deal, but we know it’s never worth compromising the harmony in our relationship and the peace a debt-free life brings.

Have I convinced you that taking control of your money is worth the work? Are you ready to put in the time and energy to change the way you handle money for the sake of your family’s future financial peace? Coming next, I’ll tell you where you go from here by outlining how to start creating a monthly cash flow budget — one that accurately reflects your income and expenses and puts you on the track to telling your money who’s boss!

I learned to budget early on, being a teacher who gets paid once a month. After paying bills, you know you’ve got to make what’s left last until the end of the month! I always had a 2nd job as well, to build some savings, make a car payment, have something to live off of during the summer months when I didn’t get paid, and have a vacation. Friends would party every weekend, blowing $100 a weekend- not my style. I shopped for work clothes at the dept. stores the first/second week in January when everything was deeply discounted. Shopping for Christmas occurred all year, so it wasn’t a drain all in one month. To this day, I scan the weekly grocery store flyers and plan meals around what’s on sale.

Excellent article, and I enjoyed reading all the comments. I am considerably older, I’m pretty sure, than most of the readers of this blog, so I am comfortable making the following comments. I’ve lived frugally all of my adult life, although my late wife was not on the same page, and spent us into massive debt while she stayed at home 19 years and raised 5 children who went to private school. Even on my modest government salary and a part-time job, I was able to save a little here and there, and invested well. Eventually I bailed us out of our sinking ship, retired at age 58, and now own my home outright. I have zero debt, treated myself to a nice new car 3 years ago, and believe I have more than enough income and savings to last a long lifetime. I tell my grown kids repeatedly to live modestly and save, which is usually ignored, but all I can do is try. I work part-time just for fun, and coupon/rebate aggressively, more as a hobby than a necessity. I try to help as many people who read my comments as I can, because I’ve known what it’s like to be young and struggling.

Yes, thanks for the comments Howard! I believe I’m a bit of an exception to most of the people in my generation 🙂 I am now of the mindset that if I don’t have the money to pay for something, then I don’t need it and even if I do have money, I’d sometimes rather save it for our future than some material item. I unfortunately, learned these lessons the hard way…racking up lots of credit card debt, student loans and then leasing a new car right out of college. Shortly after accumulating all this debt and feeling extremely burdened, I learned of Dave Ramsey and began to buy into ideas like the “debt snowball” and actually having an emergency savings acct! With lots of hard work and discipline, as a single woman I was able to get rid of my $36,000 in debt in about 3 1/2 years! I appreciate hearing words of wisdom from those who are older and wiser! Keep them coming 🙂

Excellent Points & as usual-written so well 🙂
Two phrases come to mind & compliment this: Do Without and Make Do with what you have-to stay within your budget. It is old-fashioned, but as stated-really does gives much greater peace of mind. And it gets easier to do as you go along. It is just breaking habitual behavior & replacing it with a new mind set.

I was in Kohl’s getting some free sox with a card they sent to me which was only $10.00 the sox were on a big sale and I asked for a discount, the fellow was nice and I got it, I had the cash, but I noticed people coming in and paying only the minimum amounts on their Kohl’s credit card..If you don’t have the money to actually buy the item why charge it cause you are going to have to pay the credit card off with interest..There is nothing I need to use a credit card at anyplace if I cannot afford the item at all and also the interest..I think most people just ignore this fact..Also why does everyone think they need everything all the time..I see many with I phones, this electronic device and new cars and new homes, good luck with paying for them! Jobs can be lost in a minute do most realize know this???? Evidently not…..just a thought..happy holidays to you and thank you for your blog that educates people on how they can really live not merely exist…!!!!!!!!!!!!!!!!!!

I’ve been a Dave Ramsey fan for awhile and we try to follow a lot of his principles. There’s something I’ve been wondering about though. We had a baby in August and prior to that we lived on 2 incomes and were able to save about 4 months worth of expenses plus the cost of having the baby. We knew when I quit my job, living on one income would be an sacrifice, especially since I made more money and that was our lost income. My question is this: if you save for something such as this and know that you’re going to be using some savings to cover the difference in our monthly expenses how do we keep from depleting our savings acct? My husband is still working and we have reduced our expenses and cut back on a lot but there’s still a deficit each month that we need to use a small amount of savings to cover. I’m kinda feeling at a loss of how to address this. Thanks for all you do, love the blog and FB page!!!

First off, great job planning for the loss of your income. That takes quite a bit of discipline. In this situation (and any situation where your income is less than your monthly expenses) you have 2 options:

1. Spend less money
2. Make more money

I think as you spend more time at home, you’ll get more creative about how to cut expenses. Necessity is the mother of invention, right? You may have to think out of the box. Some things we or friends have done in the past: we rented out a room to a single college student, gone down to 1 car, downsized in home to lower the house payment/rent and utilities, only buy secondhand, completely eliminated cable TV options, etc.

The second thing (and I think the easier one) is to increase your family’s income. Can your husband work overtime or get a small side job? Can you do some work on the side, like clean a house, babysit for friends, sell stuff in your house (craigslist or ebay), do virtual assistant work online, etc.? Depending on how much extra you need, your deficit could be met with a handful of hours every month and the best part is you can do any of these without any start-up money. Most of my friends consider themselves “stay-at-home moms” but I can only think of 3 that don’t do something small on the side to add to their husband’s income. But, none of them were working when their first baby was so tiny — I say this because it may be okay to use some of your savings while you get used to just being a mom, which is quite possibly the most difficult transition many of us will face :).

You’re in a great position — you have the money to cover your expenses while you come up with a solid plan. Let me know if you have any additional questions.

I am in the exact same boat, Lindsey (Congrats on your baby and best of luck to your family)!! Only my baby was due in July, I had saved up for my car loan (to cover a years worth of payments) but I didn’t expect to pay so much in hospital bills. Needless to say, my savings is almost non existent and it hurts to only take out money. It was hard for me to not return to work knowing how much of an impact it would have on our finances. It’s definitely a completely different lifestyle we now lead and it’s not an easy adjustment sometimes. But I’m confident my decision to stay home was the best for our baby. And we are going to make it work! I’m happy to have the help of sites like this to help me through it all.

Thank you for the reply! In our case, we’re down to pretty much the bare minimum (we rent, don’t have car payments or credit card debt, hardly eat out, no cable, just cheap internet since my father in law works for Century link and the only debt we have is a small student loan of my husband’s) I try to conserve power, we get free clothes from friends/family for the baby and I do my best to coupon for groceries/household items but we are a g.f/mostly dairy free household and they are a bit more expensive! I don’t know if there’s a whole lot more I can cut back on. I have been looking at doing something very part-time to help with the deficit. I only need to earn a couple hundred dollars each month…I’m struggling to find something that’s so flexible. I like the idea of cleaning or selling stuff! I appreciate the thoughts and advice! Looking forward to reading more on this series…I know there’s always more to learn when it comes to managing your money 🙂

Keep having faith in staying home with your babies! It is so worth it!!! Mine are 4 and 2 now. But, I remember those same worries in the first year. We were blessed and my husband got another job when my first was 9 months old. The hour plus commute one way was gone and the new company actually paid real bonuses. So, it helped two categories – 1) increase of income and 2) decrease in auto expense and fuel. As you go along, there will be ways your find to become more creative on managing your money. Best to you!

I honestly think making a side income is easier than figuring out how to further reduce your expenses. One thing I didn’t mention before — check your husband’s tax withholdings. Can you change it so you get more $ each month and get a smaller return? That will give you more breathing room, and might just fix your problem.

Of course, you can change your (his and/or hers) tax withholding to bring home a larger paycheck each time. Why give the government a loan for the money that is yours? They seem to change the tax tables yearly and you should change your withholding also. Some use this government withholding as a savings account until filing their tax return because many cannot save if they try. Instead, get that tax refund down to zero by changing that withholding and automatically direct deposit the extra money into a $500+ emergency fund directly from each paycheck(s). Why wait until the tax season to use YOUR money? Tip: Direct deposit into a separate savings account where you are less likely to dip into it, unless you have to.